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January 17, 2019

N Brown in Q3 sales slip, re-evaluating JD Williams business

By Beth Wright

‘Robust’ online growth from its three so-called ‘power brands’ and a stable margin performance failed to prevent a slip in overall sales at N Brown Group in the third quarter as the retailer says it is currently re-evaluating its proposition for the JD Williams business.

In a trading statement covering the 18 weeks to 5 January, N Brown said it its full-year expectations remain unchanged despite a 1.6% fall in group revenue and a 6% drop in product revenue for the period.

While its Power Brand (JD Williams, Simply Be and Jacamo) revenues were flat, the retailer said within this Simply Be and Jacamo continued to grow despite the challenging market conditions, with product revenues up 1.6% and 5.5% respectively, and by 5.9% and 6.8% for online only. Simply Be’s performance reflects the strong prior year comparator and a more targeted approach to discounting by the group during the period.

N Brown added while JD Williams declined 3.3%, having been impacted by the headwind from the migration of Fifty Plus, excluding Fifty Plus it was up 4.2%. For online sales only, JD Williams was ahead by 6.9%. The group is currently re-evaluating its proposition for JD Williams and will provide further details at its full-year results later in the year.

Meanwhile, the group’s transformation into a digital retailer continues, with total online Power Brand revenues increasing by 6.4% during the period. The group’s digital sales now account for 78.5% of product revenue compared to 71% for the same period last year.

In addition, N Brown began to stabilise its international performance in the 18 weeks to 5 January, with revenue down by 5% as it began to better re-engage with its target customer base.

Looking ahead, in what it called an “encouraging” move, the retailer is maintaining its product gross margin guidance at between 0 and -100bps for the full year, despite the highly promotional retail environment experienced during the period.

“The group delivered robust online Power Brand growth and stable margin performance in what was a challenging and highly promotional peak trading period,” says CEO Steve Johnson. “We continue to manage the anticipated decline of our legacy offline business and remain focused on improving our customer proposition to drive profitable online growth. Trading over the Cyber and Christmas periods was relatively consistent and in line with our expectations, with the group benefiting from a more targeted and efficient approach to its promotional activity.

“Based on maintained margin guidance, continued strong financial services performance and improved operating efficiency, our full-year expectations remain unchanged.”

Sofie Willmott, senior retail analyst at GlobalData, notes N Brown failed to deliver growth in the third quarter with more targeted promotional activity and lower spend on offline marketing impacting top line sales.

“N Brown focused on more controlled discounting in Q3, which enabled the retailer to protect product gross margin – with guidance for FY2018/19 remaining unchanged, despite many other retailers feeling forced to discount more significantly than planned due to the highly promotional market,” she says. “Although the more disciplined strategy will pay off with FY profits safeguarded and the retailer avoiding a reputation for widespread promotions, N Brown must quickly find other methods to drive sales volumes and return to growth.”

Regarding the group’s Power Brands, Willmott adds all three have a clear target customer and a fairly unique proposition, in contrast to many midmarket players that are struggling to identify who they are appealing to.

“N Brown should be stealing share from the likes of M&S and Debenhams and the retailer must ensure that its more targeted marketing approach is reaching these retailers’ shoppers.”

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